*the world banks are desperately trying to keep DEFLATION at bay. Why? Becuase the world economies simply cannot withstand any more losses. Well it's just too bad isn't it. Becasue you can only buy so many cars, tractors or bobbles and widgets. And if Greenspan hadn't been lying to us for years claiming we didn't have a inflation problem while rates were low and housing prices and commodity prices and healthcare costs and salaries for a few, all continued to climb. So here we are paying the price that will neve be paid really. The real CRASH has yet to take place because they all keep trying to convince each other that it's okay if Johnny lives at home with grandma the rest of his life.
from the telegraph.uk
There's no quick fix to the global economy's excess capacity
There is one overwhelming fact about the world economy that cannot be wished away. Excess capacity in industry is hovering at levels not seen since the Great Depression.
Too many steel mills have been built, too many plants making cars, computer chips or solar panels, too many ships, too many houses. They have outstripped the spending power of those supposed to buy the products. This is more or less what happened in the 1920s when electrification and Ford’s assembly line methods lifted output faster than wages. It is a key reason why the Slump proved so intractable, though debt then was far lower than today.
Thankfully, leaders in the US and Europe have this time prevented an implosion of the money supply and domino bank failures. But they have not resolved the elemental causes of our (misnamed) Credit Crisis; nor can they.
World Bank warns of deflation spiral
The global downturn is not over yet, despite some green shoots
An uphill struggle at the G20 summitExcess plant will hang over us like an oppressive fog until cleared by liquidation, or incomes slowly catch up, or both. Until this occurs, we risk lurching from one false dawn to another, endlessly disappointed.
Justin Lin, the World Bank’s chief economist, warned last month that half-empty factories risk setting off a “deflationary spiral”. We are moving into a phase where the “real economy crisis” bites deeper – meaning mass lay-offs and drastic falls in investment as firms retrench. “Unless we deal with excess capacity, it will wreak havoc on all countries,” he said.